Friday, February 8, 2008

Bihar Tubes

CMP : 139 TARGET : 242

Results In line, significant growth

In line with our expectations. Bihar Tubes Limited (BTL) has closcked a 35 % YoY growth in revenues from Q3FY08 to Rs. 675.6mn. Rising realisations and a focus on high margin pre-galvanised pipe segment has resulted in significant improvement in the PBITD margin to 13% in Q3FY08 as compared to 8.8% in the same period last year. The strong operational performance has supported a substantial 126% rise in net profit to Rs. 45.2mn.

We expect BTL to continue well on the back of its planned product forays, Inorganic growth strategy (currently acquiring Bbased Shri Lakshmi Metal Udyog) and strong marketing network. The company has plans to enter into high-diameter pipes as well as tubes and pipes catering to the oil and gas segment. We also see plenty of room for further margin improvement as pre-galvanised sales pick up and Zprices maintains their downward trend.

BTL holds an order book of Rs. 500mn as on December 2007. In view of strong order pipeline and declining Zinc prices, we are maintaining our Target price at 242. At this price the stock discounts its FY09E EPS of Rs. 29.7 by 8.1x We maintain our Buy recommendation on this scrip.